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This year will be the make-or-break year for modems, as the technology used to convert the computer's digital bit stream to an analog signal at the fastest possible rate steps up another notch.

Many manufacturers are gearing up for the next generation of 56Kbit/sec modems and many resellers are likely to smack their lips at the thought of squeezing extra margins from a box that has a higher number on it.

But for the more scrupulous resellers, 33.6Kbit/sec technology is likely to be the mainstay.

"Let's face it, people will buy anything that has a bigger, faster number on the box," said Colin Dagger, vice-president sales for the Banksia Technology Group. "And 56K looks a lot better than 33.6K - so people will be prepared to pay a premium for the faster modem."

All this will happen in the year when interest in the Internet is set to continue. This is likely to fuel growth in the home PC market and hence the buyers of modems for the home.

However, there are problems with the 56K modem. The first one relates to standards and the second is the basic technology.

There are two chip sets available and, you guessed it, they are incompatible. Prototypes of Rockwell's K56flex and Texas Instruments' X2 chip sets were demonstrated at the recent Comdex.

Rockwell chip sets for all modems are estimated by Dagger to have 70 per cent of the market for central site modems and 60 per cent of the remote market.

"Both Rockwell and TI are working towards a ratified industry standard," said a hopeful Chris McPherson, national marketing manager of NetComm. He added that the single industry standard is not expected before the end of 1997.

Both Australian companies - the privately-owned Banksia and publicly listed NetComm - are between them estimated to have up to half the market for modems in Australia.

"At NetComm we are keen to support a single industry standard but will provide customers with a choice of products that satisfies both technologies," McPherson said. "NetComm will provide a choice of products that satisfies both technologies until the single standard is reached."

McPherson pointed out that it was essential that end-users be aware of the technology ISPs would be using - if the ISP is moving to 56K.

"If you are buying a modem with a 56Kbit/sec chip set and you want to benefit from the increased speed this delivers, then you will need to ensure your ISP has chosen the same proprietary technology," said McPherson.

However, major ISPs are reluctant to choose any one of the two proprietary 56K technologies. "We'll be there with 56K as soon as we know for sure it works," said Michael Wood, vice-president, corporate relations, OzEmail.

"We're ready to go right now with 33.6 but it's hard to predict how fast the market will move to 56. The technology is there but there are a lot of other issues," said Wood. "For example, we don't know yet if Telstra can guarantee 56K over its network."

This means the unsuspecting buyer of a 56K modem will be able to run it effectively only at 33.6Kbit/sec or 28.8Kbit/sec - or even lower if the line quality is poor.

Banksia is teaming with Rockwell on the latter's 56Kflex technology. It expects to release a 56Kbit/sec analog modem by mid-year.

The theoretical limit for the analog technology that simulates digital technology used in the 56Kbit/sec modem is 64Kbit/sec. But at that speed, why bother with using analog technology to simulate digital technology? Why not go fully digital?

And looming above the debate on the move to 56K is the question of ISDN and its abolition of the need for a modem.

Dagger said that ISDN "will float up to the surface in Australia - and sooner than we think.

"Much of the bad talk surrounding the use of ISDN has come from the US," said Dagger. "Carriers there just didn't have the infrastructure to adequately support ISDN, so there were a few horror stories over there.

"On the other hand, Telstra has a PSTN that is world's best standard. All that needs to happen is to sort out the tariffs and I believe ISDN will start to move in Australia," he said.

OzEmail's Wood added: "If it's hard to predict how fast the move will be to 56Kbit/sec, it's just as hard to predict how fast will be the move to ISDN."

With the 56Kbit/sec modem not able to guarantee data throughputs due to line conditions and the speed of the other party, Dagger believes the faster analog modems will help promote ISDN. "They will give people a taste of the speeds that ISDN is capable of," he said.

ISDN guarantees a bandwidth of 64Kbit/sec over a full digital link to the user's terminal adaptor. The 56Kbit/sec technology allows you to receive at 56Kbit/sec but restricts return traffic to a slower speed. This is probably ideal for Web and Internet connections but not good for two-way data traffic.

Steady as she goes at 33.6Kbit/sec

With uncertainty surrounding the proposed 56Kbit/sec modems, it looks like resellers can look forward to steady sales of the existing 33.6 technology for at least another year.

Those uncertainties for 56Kbit/sec are based on competing incompatible technologies on the two prototype chip sets together with ISPs reluctant to move to the higher speed and the looming use of ISDN.

Boosting the 33.6 technology is the addition of simultaneous voice and data (SVD) features to the latest crop of modems.

SVD technology allows users to talk and send data simultaneously on a single phone line. When one person sends a file to another with both using SVD, the two users can talk through a speakerphone on each modem as they view the file at the same time.

Dagger said sales of Banksia's new Wave SP 336 modem with SVD were very good. The modem represents the top end of the 33.6Kbit/sec SVD modem market.

The Wave is bundled with voice/data/fax communications software, Microsoft's Internet Explorer 3.0 and games samplers. It is compatible with Windows 95 and 3.x. Recommended retail is $399.

With its swish looks and award-winning design, the Wave is already appealing to the prestige end of the SOHO market, but Pauline Cooper, director of Face to Face Internet Conferencing, believes the market is likely to become very price sensitive.

"We certainly agree 56K modems won't be here until the end of the year but the 33.6 market will still be tightly contested," she said.

Using the same Rockwell chip set as Banksia's Wave, Face to Face has a 33.6Kbit/sec external SVD modem which is likely to have a regular retail price going down towards the $200 mark.

The company is relying on saturation telemarketing with its very low overheads to give resellers a more comfortable margin than higher priced products.

"The big market for resellers will be voice and videoconferencing," said Cooper. "The 33.6K modems have demonstrated they can achieve this."

Protac International Computers is moving in a similar direction. Director Gary Jeng said the market was definitely steady on 33.6Kbit/sec modems with SVD.

Also using the Rockwell chip set, Protac's Web Excel has a recommended retail of $199. "We're using the same chip set as modems with an RRP of up to twice as much," he said. "At an RRP of $199, we are still offering a good margin for the reseller.

"In the US, competition has driven modem prices down and it's started to happen in Australia," said Jeng.

"Our manufacturing capacity in Taiwan means we can survive on very low margins. We're not afraid of competition."

As for the threat from the 56Kbit/sec modem, "It's a dud," said Jeng. "Line quality will be a big issue."

"The 56K modems are supposed to break the threshold," said Cooper from Face to Face. "We won't see the first of them until the middle of the year and we still don't know if they work," she said.

Internal or external?

An increasing tendency for major manufacturers to bundle an internal modem with the PC cuts out what has been a lucrative add-on for many resellers.

For the first-time SOHO buyer, the internal modem certainly looks more attractive.

"Users have to ask themselves if they are getting the latest technology with an internal modem," said Dagger.

"A PC maker is concentrating on the PC and not the internal modem," he said. "The modem maker is concentrating on the modem and not the PC."

This suggests that it makes more sense to opt for the slightly more expensive external modem.

"We saw a major issue recently when a large PC maker bundled its PCs with internal 14.4Kbit/sec modems," said Dagger. "While they were perfectly adequate for the job and performed well, they were not state-of-the-art.

"Australians adopt new technology very quickly," Dagger said. "You are likely to see the newest technology first in external modems."

PC add-in cards which host either four or eight separate 33.6Kbit/sec fax modems on a single board are claimed to be a compact and cost-efficient alternative to cumbersome rack mounted devices. The two cards, ServerTech 4 and ServerTech 8, work on a wide variety of platforms and hardware, provided they have an ISA bus. The design enables up to eight cards to be fitted in a single server, allowing up to 64 ports. ServerTech said it had demonstrated a server running six cards - its version of a rack modem. The ServerTech cards will work with Windows NT, SCO and other Unix based systems without a driver, provide a high level of remote control, and will soon include the ability to busy-out or reset modems.

"Our distribution will concentrate on the channel, and we are now in the process of organising a nation-wide structure, appointing four or five carefully selected distributors who will take responsibility for their own reseller outlets," said John Warwick, director of ServerTech.

"We will supply the product expertise, the warranties and training. We look to our partners to cover the integration of end-user sales."

ServerTech is an all-Australian company focused on open platform, remote access communications. Ranging across analog, ISDN and Frame Relay, the majority of its products are designed and manufactured locally.

Is cable an option?

As well as 56Kbit/sec analog modems there has also been general discussions on the use of cable modems.

Using the bandwidth in pay-TV cables now being strung pole-to-pole by Optus and Telstra, the use of cable for data transfer offers an interesting allure.

Up to 684Kbit/sec down-links and 384Kbit/sec up-links are available. Wow! Wouldn't that fill your screen with really hot graphics off a Web site in the blink of an eye?

Yes, well, it might. Cable modems rely on time division multiplexing. This means if your neighbour is also plugged in, your effective transmission rate drops as the available time is divided between you.

The other disadvantage concerns the interface between the cable operator and the rest of the world. If the rest of the world is still chugging along at 33.6Kbit/sec, it will not matter how fast the link is between the cable operator and you. It's the last link in the chain.

So cable modems may look good on paper, but they probably have a way to go.

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Selling beyond the CIO – How partners can influence the new breed of tech buyers

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